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Subsequent purchaser liable to deposit the penalty outstanding against the property in a gift deed

M/S MSD Real Estate LLP vs. The Collector of Stamps & Anr. (AIR 2020 SC 4514)

Civil Appeal No. 3194 of 2020 (Arising out of SLP(C) No. 7990 of 2020)

17th September, 2020

Counsel for Petitioners: Shri Kapil Sibal

Counsel for Respondent: Shri Tushar Mehta and other counsel

A three-judge bench of the Supreme Court consisting of Justice Ashok Bhushan, Justice R. Subhash Reddy and Justice M.R. Shah held that Subsequent purchaser was liable to deposit the amount of penalty which was outstanding against the property and which was subject matter of the gift deed.

The property, in conflict is a hotel named Lantern Hotel to which a Deed of Assent was executed on 21st May, 2005 by trustees of H.C. Dhanda Trust. The will for the property was executed by H.C. Dhanda on 26th October, 2002. The Collector of Stamps issued a notice on 21st April, 2005 and then an order on 22nd September, 2008 holding the deed to be a gift deed and a deficiency of Stamp. There was a penalty of Rs. 12,80,97,000 for the deficiency of Stamp.

H.C. Dhanda challenged the order but it was dismissed. Again an SLP was filed in Madhya Pradesh High Court where one month time was granted and the trust could not deposit the penalty. The appellant, MSD Real Estate LLP, purchased the property from the trustee. The appellant deposited the penalty amount and applied for the permission of construction at the property. The appellant was asked to deposit an amount of 8,80,97,025 by the Addl. Tehsildar as an outstanding amount of the penalty and the permission was denied by the office of Municipal Corporation. The appellant challenged the notice and the order in a writ petition. The petition was dismissed. The appellant was held to pay the penalty amount as he was the subsequent buyer of the property. It is against the order in the writ petition the present appeal is preferred.

The learned senior Counsel for the petitioner submits that the Addl. Tehsildar asking for the recovery of the outstanding amount (Rs. 8,80,9725/-) was unjustified as the appellant has already submitted the amount of deficit stamp duty and the amount for penalty was paid through post-dated cheques. He submits that the appellant was committed to pay the entire amount of the penalty which commitment was accepted by the Collector of Stamps, so the building permission could not have been cancelled. It was further submitted that in spite of the interim order passed by this Court on 07.07.2020 by which this Court has stayed the impugned orders and auction proceedings by the Municipal Corporation, the Municipal Corporation has issued several orders which are malafide and illegal as the order passed by Municipal Corporation of Indore for cancelling of the mutation is still pending.

The learned Solicitor General appearing on behalf of the State submits that no error was committed by the Addl. Tehsildar (Recovery) in 12 issuing recovery notice dated 04.06.2020 since the interim order being not operating in SLP(C) Diary No.30539 of 2017 the amount of penalty was outstanding. He submits that there is no procedure or provision for accepting the amount of penalty by post dated cheques as it claimed by the appellant. It was further submitted that amount of penalty being outstanding against the property, mutation in the name of the appellant against the property as well as building permission has rightly been rejected. Subsequent actions including the notices and orders brought by the appellant by IA No.72517 of 2020 are all actions which are subsequent actions and has no relation to issues which have been raised in this appeal. He submits that neither subsequent actions, letters were part of the writ petition nor they can be considered in this appeal.

The court, regarding the payment of penalty of Rs.12,80,97,025/-, stated that:

The High Court has rightly observed that facility to deposit the penalty by post dated cheques cannot be approved and the appellant being subsequent purchaser was liable to deposit the amount of penalty which was outstanding against the property and which was subject matter of the gift deed dated 21.04.2005. The High Court has rightly not interfered with the order dated 04.06.2020 issued by the Addl. Tehsildar (Recovery) demanding an amount of Rs.8,80,97,025/- which was outstanding on the above date. [para 16]

After considering the submission by the counsel of the parties the court held the petitioners liable to pay the penalty saying:

In pursuance of the order of the Collector dated 22.09.2008, Trustees of H.C. Dhanda Trust were liable to deposit stamp duty as well as penalty. In SLP(C) Diary No.30539 of 2017 the interim order granted by this Court on 10.11.2017 having not been complied with there was no interim order operating and the Trustees of H.C. Dhanda Trust were liable to deposit the stamp duty and penalty. [para 16]

Further, the court allowing the appeals partly held that:

In result the appeals are allowed the order of the Collector of Stamps dated 22.09.2008 is modified to the extent that penalty imposed of ten times of Rs.12,80,97,000/- is modified into five times penalty i.e. Rs.6,40,48,500/-. The appeals are partly allowed to the above extent. [para 17]

While considering the judgement of the High Court in which the order by Municipal Corporation, Indore rejecting the building permission was challenged, the apex court, protecting the rights of the Appellant, held:

In view of the deposit made by the appellant towards the penalty, the appellant is free to apply for building permission which is to be considered by the Municipal Corporation as observed by the High Court in its judgment and order dated 10.06.2020. Nothing more is required to be said about the order dated 04.06.2020 issued by the Office of the Municipal Corporation. [para 20]

Consequently, the court disposed the appeal.

Nishant Aryaman



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